REPORTING REQUIREMENTS

There has been and continues
to be a great deal of confusion about federal reporting requirements
with respect to gold purchases and sales. Part of the problem
results from the fact that it took the Internal Revenue Service
almost seven years to publish regulations on gold reporting from
the time they were required by the Tax Equity and Fiscal Responsibility
Act. In addition, many gold brokers have an incomplete understanding
of the regulations themselves and have often passed along the
wrong information to gold investors. It took several years of
negotiations between the Industry Council for Tangible Assets
(ICTA) and the IRS just to get specific regulations published.

The following are reportable
items as listed by the Internal Revenue Service. Also shown is
the threshold number of ounces that triggers the need to file
a Form 1099 with the IRS. Remember, the reporting requirement
occurs when
you as a client sell, NOT when you purchase.

Also, more than one transaction
engaged in for the purpose of circumventing the reporting laws
is to be treated as a single transaction. This includes transactions
by more than one member of the same family. The 1099s also require
the seller's Social Security number. The ICTA warns:

"This information is provided
to assist you and is not intended to be used by you as the sole
guideline for complying with these regulations. You should consult
your own tax professional. While a stricter interpretation of
the regulations is possible, ICTA believes the above guidelines
fulfill the spirit of the negotiations and the intent of the
Internal Revenue Service."

I feel obligated to pass along
the same caveats. Much remains unclear with respect to these reporting
requirements.

Although gold coins not listed
above are now exempt from reporting, there is no guarantee they
will be exempt in the future. On the contrary, since the intent
of the law is to raise revenue, it is likely that coins not on
the list now will be included in future regulations, especially
if the gold price rises. In addition, it is possible for the same
reasons that the number of coins required for the reporting threshold
will be reduced as the price of gold rises. Remember, from the
point of view of the U.S. Treasury, this is a revenue issue. For
now, the best solution is to own at least half of your gold in
pre-1933
$20 gold pieces. (Ed. Note: Since "The ABCs of Gold Investing"
1997 publication date, Mr. Kosares has added pre-1933 European gold coins, like the British
sovereign and Swiss 20 franc coins, as recommended acquisitions
for those seeking to maximize privacy in their gold holdings.)
They have been exempted repeatedly from various regulations --
including Form 1099 reporting requirements -- because of their
status as collectors' items. Finally, you cannot escape paying
taxes on your gains simply because an item is not listed by the
U.S. Treasury. You are still responsible for taxes on your gains
whether or not the item falls into a reportable category.

USAGOLD-Centennial Precious
Metals' Client Memorandum, 'Gold Confiscation: How likely is it? What you can do about it', covers the Income Tax Regulations with
respect to gold reporting requirements in detail (pages 22 and
23).

The foregoing is meant to serve
as an introduction to the reporting requirements for gold. The
law and regulations are lengthy and complicated. If you are in
doubt, the best course of action is to always discuss the matter
with a tax consultant.